President Reagan once famously said “government is not the solution to our problem; government is the problem.” This mantra has been repeated throughout the Republican echo chamber ever since. If that were true, the countries which would be suffering the most from this down economy should be those with the largest government to GDP. Studying the data, however, reveals the opposite to the true.
Let us use some examples:
- Greece – GDP $309b, Government, 36% of GDP, growth -3.5%
- Italy – GDP $2.132T, Government, 38% of GDP, growth -0.8%
- Norway – GDP $479b, Government, 59% of GDP, growth 0.3%
- USA – GDP $14.9T, Government, 40% of GDP, growth 3%
- Sweden – GDP $572b, Government, 51% of GDP, growth 5.6%
- Finland – GDP $271, Government, 52% of GDP, growth 3.6%
- Somalia – GDP $6b, Government, 22% of GDP, growth -1.5%
This is but a sampling, using examples from each category, although Somalia is the only purely Objectivist Libertarian state, so it stands alone.
By those who feel Government is the problem, Norway, Finland and Sweden should be desolate areas where the entrepreneurial spirit is crushed, businesses cannot start and operate, and only that which the government deems necessary will be purchased or sold.
I am typing this while sitting on my Ikea couch, enjoying music playing on my Nokia phone while watching live TV being beamed to me from a Telenor satellite.
In his recent article in the Globalist, Proventus AB board member Daniel Sachs gives insight into why this notion, that government is the problem, is not only false, it is dangerous. In his article, Mr Sachs goes into detail about how the strong centralized union presence in Norway is actually a boom to businesses which work there. He even gives a prime example, where the impetus for a restructuring, one which did involve layoffs in order to ensure the company’s long-term survival, was union driven, not management driven. As the union, made up of the employees itself, found, the company had significant overlap of skills, and was being mired down by payroll. To solve this, the union lead the layoff process, with the end result being smooth and quick. Compare this to the US model, where union negotiations over such situations can drag out for months, if not years, all the while bogging down the company involved. Or for the right-to-work states, where management lacks the fine details on the ground, and as a result either lays off too many workers, harming the company’s ability to support itself, or they layoff the wrong workers resulting in a lop-sided company without the flexibility to reestablish growth. This yo-yo effect to those laid off and then rehired, has a detrimental effect to American firm morale, and hurts employee loyalty in the long-term.
In the United States, unions are sector-specific, in the Scandinavian countries, unions are strong, centralized and multi-sector. This way, unions can take a far broader view of things as well as reduce the number of unions with which a company has to deal. In addition, in the Scandinavian nations, unions have a place on the boards of public companies, something that’s unheard of here in the US. By doing that, unions, through their elected board representatives, have a say in how a firm is run. Imagine an airline handled in such a manner. Rather than rising fuel prices causing a fight between management and its various unions, the union representatives become part of the planning stage, to address the issues which can hurt the company before it becomes unmanageable. The broad view enabled by such an arrangement makes the union part of the company’s biggest strength as they understand the underlying economic impact of corporate decisions.
Some in the US claim that what is best about the United States is our individualism. Fact is, the Nordic nations are also incredibly individualistic, it is after all where Vikings came from. The basic idea is that individuals are more likely to take initiative, experiment, and to take risks. They did, after all, discover America hundreds of years before Columbus. However, they view the government as a tool, or rather a full toolbox. In the US, our individual freedom is directly tied to our group affiliation; our family and friends. Not so in the Scandinavian nations, they support the single mother, the gay couple, or the family of 12 all equally and without prejudice. As a result, the average person in Nordic nations is less dependent than the average person in the US, which encourages the higher rates of entrepreneurship in those nations.They do not punish success. The Nordic nations, despite having less than 0.2% of the world’s GDP, have 4% of the Forbes richest people.
The reason why this works is because for centuries, the Nordic nations have not considered addressing inequality redistribution, but pre-distribution. Instead of focusing on fixing disparities after they happen, the Nordic nations put into place a system which ensures that such disparities do not happen in the first place. While in the US, a person’s chance of becoming a multi-millionaire is primarily influenced by where they were born, in the Scandinavian nations, this is not the case. Other nations in the world are taking notice. The Labour party in the UK has begun to discuss pre-distribution in anticipation of the 2015 elections, for example.
Can the Nordic model work in the United States? Yes, very easily. It is, in fact, based on the very concept of “We, the People,” that we are all in this together. United we stand, divided we fall.
And right now, we are more divided than ever.
Figures from The CIA Worldbook.